Immigration Law: If a GmbH generates a surplus in one year, this cannot compensate for years of failure under Section 21 of the German Residence Act (AufenthG).

Higher Administrative Court of Saarland, Decision of 19.08.2021, Case No.: 2 B 164/21

Background and Initial Situation

The applicants are Iranian nationals who have been residing in Germany for several years. Applicant 1) came to Germany in 2016 with a visa to engage in self-employment as the managing director of D. GmbH. His residence permit was extended until November 3, 2018. Applicants 2) and 3), his wife and daughter, followed in 2017 under family reunification and were also granted residence permits.

In December 2020, the relevant authority rejected the applicants‘ applications for the extension of their residence permits and threatened them with deportation to Iran. Additionally, a three-year entry ban was imposed. The applicants filed an objection against this decision and applied for a suspension of the deportation order. However, the Administrative Court of Saarland rejected the applicants‘ request, prompting them to appeal this decision.

Reasons for the Rejection of the Residence Permit

The Administrative Court concluded that the conditions for extending applicant 1)’s residence permit under Section 21(1) of the German Residence Act (AufenthG) were not met. According to this provision, a residence permit for self-employment can be granted if there is an economic interest or regional need, and the activity is expected to have a positive impact on the economy. Additionally, the financing of the business idea must be secured by equity or loan commitments.

In this case, D. GmbH, managed by applicant 1), could not meet these criteria. From 2016 to 2018, the company operated without profit, and even in 2019 and 2020, the profits earned were insufficient to establish the long-term economic viability of the business. The surpluses generated were too low to justify a positive prognosis for the company’s future after years of economic failure.

Family Reunification and Legal Consequences

Applicants 2) and 3) had received their residence permits through family reunification, based on the residence permit of applicant 1). However, as applicant 1)’s residence permit was not extended, the basis for the family members‘ residence permits also ceased to exist. Under Section 30(1) of the German Residence Act (AufenthG), family reunification requires that the spouse holds a valid residence permit, which was no longer the case here.

Therefore, the rejection of the residence permits for the wife and daughter of applicant 1) was a direct consequence of the denial of his residence permit extension. Additionally, the legal basis for the daughter’s reunification under Section 32(1) AufenthG was no longer applicable, as neither parent held a valid residence permit.

Significance of the German-Iranian Settlement Agreement

The applicants referred to the German-Iranian Settlement Agreement (NAK) of 1929, which grants certain rights to Iranian nationals regarding residence in Germany. The agreement contains a clause allowing nationals of both contracting states to enter, travel, reside, and settle in the territory of the other state.

However, the agreement also contains an immigration reservation clause, giving the contracting states the right to regulate or prohibit immigration into their territory. The court held that this immigration reservation takes precedence over the residence-related provisions of the agreement. Therefore, the German Residence Act, which regulates the entry and stay of foreigners, takes precedence over the provisions of the Settlement Agreement. This means that the German-Iranian Settlement Agreement does not override the requirements of Section 21(1) AufenthG for the issuance of a residence permit.

Appeal and Final Decision

In their appeal, the applicants argued that the company’s economic situation had improved in 2020 and that the livelihood of applicant 1) was secured. However, the Administrative Court had already determined that the profits earned in 2020 were insufficient to ensure the long-term economic viability of the company. The fact that applicant 1) had additional income in Iran did not change the court’s assessment regarding the criteria of Section 21(1) AufenthG.

Furthermore, the applicants pointed out that applicant 2) was employed in a socially insured job and that both she and the daughter were covered by health insurance. However, these circumstances could not establish an entitlement to a residence permit, as the basis for family reunification, applicant 1)’s residence permit, had lapsed.

Ultimately, the court ruled that the appeal was unfounded and dismissed it. The requirements for granting a residence permit under Section 21(1) AufenthG and the legal basis for family reunification under Sections 30 and 32 AufenthG were not met, and the German-Iranian Settlement Agreement could not alter this. The deportation order and entry ban thus remained in place.

Source: Higher Administrative Court of Saarland

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